EG PE ratio is not high, less than 9 times.
Profit growth is expected. They have changed their product mix and earn higher profit margin.
In July 2014, Singapore-based Jubilee acquired a 26% stake in the Group and subsequently increased its ownership to 30.5% in January 2015. The strategy behind these corporate activities is to integrate the Group together with Jubilee for broader customer base and wider geographical base, to form a one-stop electronics vertical integration solution provider by developing product designs and box build services for global customers.
EG has started getting orders from new customers base.
Old news: EG Industries Bhd has secured a US$36mil (RM146mil) contract to be the sole manufacturer for Flic, the world’s first wireless smart button that creates a shortcut to favourite actions on mobile devices. The electronics manufacturing services (EMS) company said on Monday it was awarded the two-year contract by Sweden-based Shortcut Labs AB to manufacture Flic.
Assumuing a profit margin of 5%, profit of 7.3mil two years, 3.65mil a year. Almost 20% of last 4 quarters profit. And this is just at the beginning stage. I expect more to come.
EG is planning to list their Thailand unit IPO.
They are reducing their gearing ratio. Last year net gearing was about 1.2.
No dividend, not sure when they are going to pay. Maybe once EG have reduced gearing and have comfortable cash level, hopefully will pay.
Last year they had rights issue.
Purchase and upgrade of machinery. Proposed is RM16mil, but only used RM3.2mil as at June 2016. Still got plenty to be used. Proposed to be used within 24 months from Nov 2016.
Expansion and upgrade of factory. RM20mil but used only RM3.22mil. Proposed to be used within 12 months from Nov 2015.
Acquisition of new businesses or assets. RM8mil with 24 months. Zero usage.
Once the money is used up, probably stronger profits are coming. Of course it is not 100% predictable, but this is what the company has proposed. I dont think they will spend without benefits.
The Thailand IPO is big. The IPO is about RM34.3mil and its Thailand unit is worth RM114mil, its 70% stake is worth about RM80mil
EG market capitalisation is RM184mil against its Thailand unit that will be worth RM114mil market capitalisation.
Market volume for EG stock is not low. Liquidity is there. Few hundred thousand to few million shares transacted a day.
Hopefully this stock will move up in the middle of August in anticipation of better profit, target to be announced in end of August.
Once a better profit is announced, few rounds of price increases. Those who take profit and did not manage to buy back may miss the boat. Sit and enjoy.
After few weeks hopefully analysts start to cover this stock and there will be continue uptrend.
Risk? As usual, unexpected poor result and adverse news development.
Of course I have made many wrong decisions.
Recent Losses: Supermax, Prolexus, Complete.
Profit: Tguan, JHM, Superln, OCK, Vitrox, AWC, Bison.
Losses are limited, 30%? 50%? Max is 100%.
But stocks that I profited, it could be more than 100%.
Afraid to lose, but why not afraid to miss the boat.
Nothing is sure win. Assess the risk vs reward.
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EG (8907) - Why EG Share Price may Go Up in mid of August